QCP Asia Morning Colour - 6 Mar 24

- Last night, BTC printed a new all-time high at 69.3k, only to face a harsh rejection back down to 59.2k within 5 hours.
- The sharp drop on the back of leveraged longs got liquidated with over 1b USD notional of liquidations on Binance alone.
- ⁠The dip was bought up very quickly and aggressively, and 60k proved to be a good support level.
- ⁠The desk thinks this is a good opportunity to buy topside vol (ie calls); we saw significant interest to buy Sep-Dec calls in both BTC and ETH on this dip.
- ⁠Funding is back to sensible levels (30% ann. on Binance) and the likely scenario is the outperformance of ETHBTC as the ETH spot ETF narrative comes into play.
- Despite the leverage washout, term futures are surprisingly still trading at a good premium to spot, making the cash and carry trade much more attractive. There has been a rush from clients to sell the spot-forward spread at these peak levels especially out to Sep-Dec to lock in risk-free yield for the year. We do not expect this to last for too long.

QCP London / New York Colour - 6 Mar 24
- Last night saw the much anticipated washout with mass liquidations in the highly leveraged perps.
(BTC traded to 59,224 low and ETH to 3,205 low)
- But the bounce has been extremely impressive, particularly in ETH which continued to new highs today.
(3,897.20 high so far)
- With some of the leverage taken out, the path higher has now opened up and we look to a near-term break higher as the uptrend resumes immediately.
- Surprisingly, while perp funding is relatively lower (around 50% level), the rest of the forward curve is higher which makes the spot-forward spread trade even more attractive than before the overnight washout!

Trade Idea:
BTC 100K JUN Principal-Protected Digi (PPD)
This is a principal-protected strategy in USD that will pay out a 5% ann. yield on expiry at 28 Jun.
Additionally, if BTC spot price is above 100k at expiry, the payout is 65% ann.
For example, a $1m deployment would earn $203,013.70 if BTC expired above 100K and $15,616.44 if BTC expired below.
(spot ref: 66,800)

QCP Market Update - 7 Mar 24

Even after the leveraged flush out 2 days ago, markets continue to be well supported. BTC has bounced back above 66k from close to 59k lows and ETH continues to break highs of this year.

The retail speculative frenzy is far from over though. Memecoins like WIF and BONK continue to pump, Altcoin funding rates are still over 50% ann. and funding rates on retail-focused exchanges like Binance and Bybit continue to be higher than Deribit.

Also, the spot-forward spread keeps getting higher and richer! This has been the most popular trade on the desk by a mile. One can now lock in 15% ann. risk-free for the whole year out to Dec 2024. One would be hard pressed to find a trade with better risk-reward.

BTC spot ETF continues to see consistently large inflows, averaging $550m daily. We believe this demand will keep the crypto uptrend in place. On Monday, Blackrock submitted an application to include BTC spot ETFs in its BlackRock Strategic Income Opportunities fund. Other asset managers will no doubt follow suit and keep demand for spot ETFs strong.

Another factor providing support has been the Fed. Key speakers like Waller and Powell have affirmed that the Fed is still on path to cut rates this year. The USD has been trickling lower on this and even Gold has broke all-time highs!

The spot-forward spread continues to be the lowest hanging fruit. The following is an indicative run for BTC and ETH:

| BTC |Ann(%)|
| 29MAR24 | 17|
| 26APR24 | 19 |
| 28JUN24 | 16 |
| 27SEP24 | 16 |
| 27DEC24 | 15 |

| ETH |Ann(%)|
| 29MAR24 | 17|
| 26APR24 | 20 |
| 28JUN24 | 17 |
| 27SEP24 | 15 |
| 27DEC24 | 14 |

QCP London / New York Colour - 8 Mar

- Front-end vols getting sold off as we head into the weekend, perhaps pricing in some exhaustion in the market.
- Forward curve remains elevated and USDT trading is at a premium, indicating speculative long positioning remains strong.
- Flows indicate a rotation from BTC into ETH and it is likely ETH breaks above the 4k level in the next few days.
- We expect a test of all-time highs for ETH at 4878 upon break.

Weekend Trade Idea: ETH 5k JUN Principal-Protected Digi (PPD)

This is a strategy in USD that will pay out a minimum 5% pa on 28 Jun expiry. If ETH spot price is above 5k at expiry, the payout is 45% pa.

For example, a $1m deployment would earn $138,082.20 if ETH is above 5k on 28 Jun. If if was under the strategy would earn $15,342.50.

QCP London / New York Colour – 11 Mar 24

- We saw a decisive breakthrough of 70k and 4k for BTC and ETH respectively today.
- The move appears to be driven by news of tje London Stock Exchange (LSE) accepting applications for Bitcoin, Ethereum ETN admission.
- Perp funding rates spiked above 100% on Deribit and Binance as the market continues to pile onto their already leveraged positions.
- This leveraged FOMO buying frenzy is pushing the whole forward curve even higher (over 30% p.a.).

What is the spot-forward spread trade?

- Speculators are buying BTC on leverage through margined futures causing the futures to trade at a large premium to spot price.
- Anyone with dollars to deploy can earn this premium by buying spot and selling the future/forward in a package with the desk.
- The spread trade is risk-free as the forward will settle to the spot price at maturity and the full principal along with the interest premium will be returned.

An indicative BTC spread run below:

| BTC     |Basis(USD)|   AnnRate(%) |   Tenor |
|:--------|---------:|-------------:|--------:|
| 29MAR24 |  1160.87 |        32.79 |      18 |
| 26APR24 |  2648.37 |        29.27 |      46 |
| 28JUN24 |  4810.87 |        22.44 |     109 |
| 27SEP24 |  7883.37 |        20.04 |     200 |
| 27DEC24 | 10165.9  |        17.76 |     291 |

QCP Asia Morning Colour - 12 Mar

- Overnight BTC and ETH have printed new highs of 72,944 and 4,094 respectively.
- BTC is now one step closer to being the true "Digital Gold" as it surpasses the market cap of Silver.
- The vol-market continues to express the bullishness in BTC as vols remain very elevated for the calls and particularly in the backend of the curve.
- However, things are less optimistic for ETH as the 1-2 months risk reversals (calls vs puts) on ETH went from positive to -5% today as the market started pricing in a relatively low probability (35%) of spot ETH ETFs getting approved by the May/June deadline.
- We are wary of another washout with funding rates reaching elevated levels again, although we still expect dips to be bought up very quickly.
- With two major macro events coming up (CPI tonight, FOMC next week), our preferred strategy would be to deploy cash into delta-neutral, spot-forward spread trade (close to 30% p.a. Yields).
- We have seen tremendous interest in this risk-free trade and increasing interest to lock in high yields out to December.

Spot-Forward Spread Indicative Run

| index   |   Basis |   AnnRate(%) |   Tenor |
| 29MAR24 |  973.35 |        29.13 |      17 |
| 26APR24 | 2530.85 |        28.62 |      45 |
| 28JUN24 | 4553.35 |        21.45 |     108 |
| 27SEP24 | 7664.6  |        19.6  |     199 |
| 27DEC24 | 9904.6  |        17.38 |     290 |

QCP London / New York Colour – 12 Mar 24

- The risk reversals have just turned negative for ETH front date expiries.

What does this mean?
- The risk reversal measures the difference in implied volatility of call options vs put options* and so reflects the markets perception of ‘where the risk is’. A negative number means the market perceives the greater risk is that spot will be lower.
* specifically the 25 delta call and the 25 delta put

- The ETH risk reversals flipping to negative could reflect increased demand for put options as protection against a washout of speculative long positions.
- Altcoin speculators might also be buying ETH puts as a proxy to hedge altcoin downside.
- This makes us wary of a possible correction given the amount of leverage in the market. However, we think that the market will buy any dip aggressively.

- ETH spot-forward spreads have also dropped slightly while BTC spreads remain elevated. A sharp drop in spot price is likely to drag the forward spreads lower as leverage longs get taken out.

An updated run of BTC spot-forward spreads below:

| BTC     |   Basis |   AnnRate(%) |   Tenor |
|:--------|--------:|-------------:|--------:|
| 29MAR24 |  909.45 |        27.23 |      17 |
| 26APR24 | 2489.45 |        28.16 |      45 |
| 28JUN24 | 4509.45 |        21.25 |     108 |
| 27SEP24 | 7576.95 |        19.38 |     199 |
| 27DEC24 | 9803.2  |        17.21 |     290 |

QCP Asia Morning Colour - 13 Mar 24

- The ‘risk reversal’ flush we were looking out for happened overnight but it was extremely short-lived.
- ⁠BTC touched 68,600 and ETH touched 3,825 before bouncing sharply back above 72,000 and 4,000 levels respectively.
- ⁠We are seeing front-end vols softening and ETH vols particularly dropping more than BTC.
- ⁠Is the market pricing out the probability of an ETH spot ETF approval? Or it might just be due to some massive call selling overnight and this morning, over 10k ETH 5400-5600 April expiry.

Trade ideas for the week:

1. The whole forward curve dropped 3-4% overnight but has since bounced back to highs. However perp funding has moderated. If you are looking to lock in a high yield without taking any directional risk, this bounce is another chance to sell the spot-forward spreads at these elevated levels.

2. ⁠To continue riding on the bullish move, the Enhanced Sharkfin offers great risk-reward.

Indicatively, an end April 75/90k Enhanced Sharkfin Investment pays a base coupon rate of 6% p.a. with max payout of 172% p.a. if BTC closes right below 90k at expiry. Hence this structure guarantees a 6-172% p.a. return with no downside as it is principal protected.

This structure works if you have a downside view as well, for example, it can be done with 70/55k strikes.

QCP Asia Morning Colour - 14 Mar 24

- BTC price is stalling near the highs and funding/front-end forwards have come off hard.
- Perp funding is back to lows and Mar/Apr futures are below 30% with Binance forwards lower than Deribit!
- Does this drop in funding rates signal a reversal in leveraged long interest, meaning spot price will come off?
- Or does a reduction in leverage levels open the path for spot price to take another leg higher?
- This is impossible to say, but we do know it is difficult it is for funding rates to sustain at these elevated levels and we think it will continue to normalize. This could be a good chance to sell more spot-forward spreads before it normalizes further (indicative run below).
- Another interesting observation is the rotation of capital into large cap alts with SOL, BNB and AVAX significantly higher overnight.
- BNB in particular has managed to create a virtuous self-reinforcing cycle through its launchpool as BNB stakers sell their hefty airdrops and buy even more BNB to compound returns for the next launchpool release (this is practically weekly compounding given the frequency of releases!).

Indicative spot-forward basis/spread:

| index   |    Basis |   AnnRate(%) |   Tenor |
|:--------|---------:|-------------:|--------:|
| 15MAR24 |   -76.61 |       -38.28 |       1 |
| 22MAR24 |   320.89 |        20.04 |       8 |
| 29MAR24 |   663.39 |        22.1  |      15 |
| 26APR24 |  2423.39 |        28.16 |      43 |
| 28JUN24 |  4635.89 |        21.85 |     106 |
| 27SEP24 |  8028.39 |        20.36 |     197 |
| 27DEC24 | 10512.1  |        18.24 |     288 |

QCP Asia Morning Colour - 15 Mar 24

- Overnight, the market attempted another correction (BTC to 68.5k and ETH to 3,715) but it was met once again with a hard bounce back up above 71k and 3,850 respectively.
- It is very difficult for these short sell-offs to put a lasting dent on the uptrend as long as the daily BTC spot ETF demand remains strong.
- We are preparing for a volatile weekend as the market positions for FOMC next week (20 Mar). Perpetual swap open interest has been sneakily creeping higher in the last 24 hours as well.
- Risk reversals for both BTC and ETH are skewed to puts now on the front end.
- However, the desk has seen strong demand for year-end BTC 100-150k calls.
- Does this mean we see a short-term dip before closing the year closer to BTC at 150k?
- Perp funding and the forward curve remain elevated. We continue to think the spot-forward spreads are a good sell for a 20-30% risk free trade.

Indicative BTC spot-forward basis/spreads:

| BTC     |    Basis |   AnnRate(%) |   Tenor |
|:--------|---------:|-------------:|--------:|
| 29MAR24 |   675.32 |        24.57 |      14 |
| 26APR24 |  2339.07 |        28.37 |      42 |
| 28JUN24 |  4487.82 |        21.77 |     105 |
| 27SEP24 |  7824.07 |        20.34 |     196 |
| 27DEC24 | 10335.3  |        18.35 |     287 |

QCP London / New York Colour – 15 Mar 24

- Volatility hit the market even before the weekend with BTC dipping to 65,565 and ETH to 3,566 so far.
- Overnight BTC spot ETF inflows came in weak at $132.7m nett which is a very steep drop in demand.
- The negative risk reversals reported this morning has deepened and extended all the way out to May; the market is particularly nervous about BTC below 65k and ETH below 3k level.
- We've also seen some sizeable unwinding of calls by institutional players who were the ones buying calls aggressively on the way up.
- The whole BTC forward curve has also dropped by around 3-4% since this morning. This is possibly one of last chances to lock in some basis yield before the curve normalises to its usual 8-10% level (still around 18-25%).

Downside Hedge Idea: BTC or ETH Put Spreads

Example:
29Mar2024 60/50k Put Spread
Cost is $1190 per BTC
(spot ref: 67k)
The structure starts to pay out if BTC expires below 60k level and reaches max payout of $10k per BTC if price is 50k or lower at expiry.

QCP Asia Morning Colour -16 Mar 24

- Massive dip buying in the NY session lifted BTC prices back close to 70k which is probably driven by spot ETF demand.
- While ETH risk reversals remain skewed to the downside, BTC risk reversals saw a bullish flip from -10% to +1% in the front-end.
- This was driven by large buying of BTC 75k calls that expire this coming Friday. Is the market expecting BTC to break the highs again on the back of a dovish FOMC?

Weekend Bullish Trade Idea:
Buy end-April 80k Call with 100k Knock-Out (European)
Costs 1660 USD per BTC (ref 69,200)
At expiry if BTC expires right below 100k, you get a nice 12x payout of $20k profit per BTC.

QCP New Product Alert:
BTC Daily Discounted Dollar Cost Averaging (DDDCA)

Buy BTC everyday at a discount to current spot price.

Live example:
- $100k deployed over 4 weeks

- You will buy $3,703.70 worth of BTC at 65,280 price every day for 4 weeks (from 17 March to 12 April)

- Condition: Spot price needs to be below 72,760 for the discounted purchase to be made. If price is above 72,760 (close to all-time-highs), the $3,703.70 for that day is returned to you.

- This means if BTC is at 72,759 on a particular day, you will still be buying BTC at 65,280 (10.3% discount!)

- Catch: if BTC price is below 65,280 you will still buy at 65,280.

- The whole structure (discount strike + barrier) can be rolled higher any time at zero cost to ensure you continue buying at discount even if prices go higher.

(The structure above is assuming BTC spot price at 68,000. The strike, barrier, and length of the product are fully customisable to suit your requirements. Available for ETH as well.)

QCP Asia Morning Colour - 18 Mar 24

- The weekend was filled with both fear and greed as BTC was driven down to 64,500 lows.
- BTC has since bounced back above 67k and we've seen heavy BTC put selling which suggests that ‘fear’ has dissipated in BTC and investors are happy to buy the dip.
- We also continue to see buying interest in long dated Sep and Dec BTC calls targeting 100-150k indicating ‘greed’?
- ETH is more concerning as perp funding has gone negative and risk reversals continue to show a downside skew. The market is very nervous about ETH price cracking in spite of the continuing rally in alts.

‘Fear + Greed’ Trade Idea:
BTC UFCC (Unconditional Fixed Coupon Convertible)

- This is similar to selling puts for yield but with a significant protection from conversion or exercise.

Live example:
Maturity: 27DEC24 (40 Weeks)
Unconditional Coupon Frequency: Every 1 week(s)
Strike: 60,300 (-10%)
Protection Level: 50,250 (-25%)
Coupon Rate: 38% p.a.
(spot ref: 67,000)

1. For a $1m deployment you will receive a weekly coupon of $7,308 every week no matter what (ie 38% p.a. unconditional).
2. At expiry, if BTC price is above 50,250 level, the principal of $1m will be returned along with the all coupon payments.
3. At expiry, only if BTC is below 50,250, your $1m will be converted to BTC at 60,300.

QCP Asia Morning Colour -19 Mar 24

- There is a sea of red this Asia morning with ETH breaking recent lows, touching 3,382.
- The fear that we've been highlighting in ETH is growing with front-end downside skew getting deeper down to -15%.
- In BTC, early spot ETF tracking shows a record outflow for GBTC of -$642.5m. We will be closely tracking the aggregate ETF flow numbers today. A nett negative would be a distinctly bearish signal.

Trade Ideas:

1. Bearish - Downside Enhanced Sharkfin
This works well because the yields on the forward curve are still unnaturally elevated (for now) allowing for a high 5-6% base plus returns from a large downside price move. And it is a principal protected dollar deployment (i.e. zero downside risk making it a 5-200% strategy).

2. Bullish - UFCC
This is similar to selling puts with significant protection for a yield of around 40% p.a. (see previous broadcast for details: https://xn--r1a.website/QCPbroadcast/1164).

QCP London / New York Colour - 19 Mar

- For the first time in awhile the overnight BTC spot ETFs saw outflows of -$154.3m.
- As expected, both BTC and ETH are breaking recent lows on the back of this.
- Is this negative overnight number a pre-FOMC risk squaring blip? Or the start of a series of net outflows, which would surely result in further correction?
- This will be the most important number to look out for the next few sessions. Clients can reach out to us in your personal trading chat for early updates on the number in Asia time.

- In spite of such a large spot move, perp funding rates are still 20-30% on the retail-focused exchanges. This means that speculators are still adding to leveraged longs on the dip. Does this mean the correction has more legs?
- The forward curve is still surprisingly elevated. Even now, you can lock in a 23% risk-free yield on an ETH April spot-forward spread!
- Naturally, the desk is still seeing strong interest to sell these spreads. We expect they cannot stay so high for much longer, especially if market continues to move lower.

Indicative ETH spot-forward spread:

| ETH     |   Basis |   AnnRate(%) |   Tenor |
|:--------|--------:|-------------:|--------:|
| 26APR24 |   80.88 |        24.24 |      38 |
| 28JUN24 |  177.62 |        20.03 |     101 |
| 27SEP24 |  284.88 |        16.9  |     192 |
| 27DEC24 |  376.5  |        15.15 |     283 |

QCP Asia Morning Colour - 20 Mar

- Some mayhem in the markets as we head into FOMC later tonight. BTC and ETH have traded to 61,500 and 3,145 lows so far.
- Grayscale saw slightly smaller outflows of -$443.5m overnight but will inflow from the other ETFs bring us to a net positive number today?
- Another net negative number will likely cause support to crack. For clients, you can reach us in your personal trading chats for full ETF numbers in the next few hours.
- Downside panic worsened in ETH with front-end risk reversals sinking even deeper to -20% and vols spiking to +10% over BTC.
- 60k level in BTC should provide some psychological support but we need demand from BTC spot ETFs for this level to hold.

Trade Ideas:

1. If you want to buy this dip, deploying an Accumulator will allow you to buy BTC below 55k (12.5% discount) for the next 12 weeks.

2. If you are still long BTC and want to ride this out, deploying a UFCC on your BTC will give you a 12%p.a. weekly yield for 12 weeks with protection up to 124k level.

(BTC spot ref: 62,000)

QCP Market Update - 20 Mar 24

- BTC spot ETF inflows peaked on 12 Mar at +$1,045m. Since then, net inflows have decreased and spot price has tumbled along as well. (Chart below)
- Overnight, we saw a net outflow of -$326.2m which is the largest single day outflow to date.
- BTC had a knee-jerk reaction, trading to 60,770 lows but has since bounced back above 63,000.
- Does this mark the start of daily net outflows? Or is this just some pre-FOMC position squaring before a resumption of the uptrend?

FOMC (2am SGT tonight):
- The Fed previously signaled 3 rate cuts for the year. As expected, the market is pricing in 3 cuts with the first to happen in June.
- However, inflation has been sticky and energy, housing and supply-side costs have risen in the past few months.
- This could cause the Fed to hold back on cuts and today's dot plots might show a change in signal to 2 cuts instead of 3.
- If this hawkish surprise happens, it would be bearish for BTC spot price.

- Our view is that the bull market is NOT over. We are in the middle of a broad liquidity rotation that will likely take BTC to new highs post-halving.
- However, the near-term correction could be violent given the amount of leverage that remains.
- We think the best way to play this is a zero-downside strategy with high topside convexity like the Enhanced Sharkfin which has a 6-200% return profile.
- The principal protection eliminates worry on a sharp correction while retaining profitability if BTC breaks new highs.
- Clients may check with our desk for live pricing.

QCP Asia Morning Colour - 21 Mar 24

- FOMC was clearly dovish (and bullish):
1. In Powell's press conference speech, he was not concerned about the high inflation numbers in Jan and Feb and even highlighted weakness in the labor market.
2. In the dot plot, more members shifted their projection to 3 cuts in 2024 (9 members vs 6 in Dec)

- There was a massive reaction in crypto with a complete reversal back above 67k for BTC and above 3,500 for ETH.
- Demand seems to be largely spot driven with little change in funding rates. (BTC spot ETF flow data in the next few hours will confirm the spot demand)
- The downside fear in ETH has subsided in spite of headlines around the SEC moving to classify ETH as a security.

- Will there be clear skies from here to new all-time highs? Perhaps it is time to put on some Accumulators or Daily Discounted DCA structures to collect BTC or ETH at discount as we head into the next quarter.
- Spot-forward basis spreads are back above 20% in the front-end. This is a zero-downside strategy for folks who are still worried about price correction from here.
- Clients may check with our desk for structure details and live pricing.

QCP London / New York Colour - 21 Mar 24

- We had a third consecutive day of BTC spot ETF net outflows at -$261.5m.
- The market ticked a little lower in reaction to the ETF outflow number, touching 66k level before crawling back above 67k.
- The market does feel slightly exhausted after being bumped around by headlines the past week and has landed right in the middle of the recent high (73,840) and low (60,770).

Exhaustion Trade Idea:
- If BTC consolidates in this defined range, a Principal-Protected Range Accrual pays close to 30% p.a. every Friday for the next 4 weeks as long as BTC is within this range at each observation.
- This is a zero-downside strategy, meaning if BTC is above or below the range there is no coupon payment but the principal capital is returned in full at expiry after 4 weeks.